1. News Overview
Russia intends to impose VAT on companies that rent mining equipment or data centers to overseas companies and mining pools
Since September 1, 2024, Russia has officially allowed the use of cryptocurrencies in cross-border trade and digital asset exchanges, covering mainstream currencies such as Ethereum (ETH) and stablecoin USDT, marking the country as one of the few countries in the world to include cryptocurrencies as legal payment tools. In November of the same year, Russia's cryptocurrency mining industry was legalized, ending years of gray area operations. In January of this year, Russian law requiring all industrial-grade miners and "mining infrastructure operators (MIOs)" to register in the national directory officially came into effect. As of April 1, 2025, 116 MIOs and 606 industrial miners (промышленные майнеры) have completed registration, but the Russian Federal Tax Service (FTS) believes that a large number of companies are still not compliant. The list is managed by the FTS, which is currently formulating tax details for industrial miners (промышленные майнеры) and MIO annual profits. On May 1, 2025, the Russian Ministry of Finance plans to impose value-added tax (VAT) on companies that rent mining equipment or data centers to overseas companies and mining pools. Energy companies that provide electricity to overseas mining companies are also within the scope of this new regulation. The Ministry of Finance said that this move is intended to clarify the taxation process for mining equipment leasing and formulate tax rules for companies that provide "mining computing power" to non-Russian customers. Due to the lack of "clear interpretation" in the current regulations, companies face difficulties in reporting, and VAT may apply to real-time, monthly or annual rental bills. 2. Details of Russia's new VAT regulations 2.1 Legislative process The Russian Ministry of Finance formally proposed a bill on the collection of VAT on cross-border mining services on May 1, 2025, marking a key step in the country's tax supervision of the cryptocurrency mining industry. The bill is currently in the public consultation period, allowing industry associations, companies and the public to provide feedback on the terms. After the consultation period, it will enter the parliamentary review process. If the bill is successfully passed, it is expected to be officially implemented on January 1, 2026, and Article 149 of the Russian Federation Tax Code will be revised simultaneously to clarify the VAT rules for digital currency-related transactions. To ensure a smooth transition, the bill sets an adjustment period for registered miners and infrastructure operators, and requires electricity suppliers to separately report cross-border mining electricity consumption so that tax authorities can accurately distinguish the tax objects and avoid excessive interference with energy infrastructure services. The current focus of the dispute is on the scope of taxation: the Energy Industry Association opposes the inclusion of electricity sales in the VAT system, believing that it belongs to energy infrastructure services and the cost has been reflected through the electricity price mechanism, while the Ministry of Finance advocates that electricity is the core cost component of mining activities and should be included in the VAT to fully cover the economic value. This disagreement may affect the final tax rate setting and the compliance costs of related industries. 2.2 Legal Definition and Registration Requirements for Industrial Miners and MIOs Russia clarified the legal definitions of industrial miners (промышленные майнеры) and mining infrastructure operators (MIOs) as early as August 8, 2024. According to the Russian state news agency ITAR-TASS, Russian President Vladimir Putin signed a law on August 8, Moscow time (UTC+3). The law introduces new concepts such as digital currency mining, mining pools, mining infrastructure operators, address identifiers, and individuals who organize mining pool activities, and specifically stipulates the definition, identification criteria, registration objects, and materials and documents required to be submitted for registration of industrial miners and "mining infrastructure operators (MIO)".
Industrial miners (промышленные майнеры) refer to legal entities or individual operators engaged in large-scale cryptocurrency mining activities, whose mining activities usually involve high energy consumption and large equipment scale. Industrial-grade miners must meet specific conditions: (1) In terms of the registered entity, it must be a Russian legal entity or individual business operator, and must be included in the "Cryptocurrency Mining Individual Register" managed by the Federal Tax Service (FTS); (2) In terms of energy consumption, if natural person miners use household electricity to carry out mining activities, they must ensure that electricity consumption does not exceed the limit set by the government (the specific value is dynamically adjusted by the Ministry of Energy); (3) In terms of compliance obligations, it is necessary to regularly report mining income to the tax authorities and pay taxes based on income levels. Investors with annual income below a certain threshold (2.4 million rubles) will be subject to a 13% tax rate, while the portion above this threshold will be subject to a 15% tax rate.
Mining Infrastructure Operator (MIO): refers to an operator that specializes in providing infrastructure and services related to cryptocurrency mining, including but not limited to the management of mining equipment and the operation of data centers. The identification standards for mining infrastructure operators (MIOs) are relatively strict, and their entry barriers are reflected in many aspects: (1) In terms of the licensing system, it is necessary to obtain a "Mining Infrastructure Operator License" issued by the federal government, and the license is approved by a special committee under the Ministry of Digital Economy; (2) In terms of service scope, it can provide mining farm hosting, data center leasing, computing power sales and other services, but it is clearly prohibited to combine with the core business of the power industry such as power transmission and dispatching; (3) In terms of registration requirements, it is necessary to submit corporate articles of association, technical plans, power procurement contracts and other materials to the Federal Tax Bureau; (4) It is necessary to undergo an annual compliance audit.
According to the registration requirements of the Russian Federal Tax Service (FTS), industrial miners and mining infrastructure operators (MIOs) need to submit a series of documents to complete the compliance registration:
(1) Corporate legal persons need to provide a notarized copy of their articles of association, clearly including the business scope clauses related to industrial assembly or cryptocurrency mining, and attach the tax registration certificate and the main national registration number of the legal person.
(2) If the applicant is a self-employed person, they must submit personal identification documents (such as notarized passports) and the main national registration number of the self-employed person.
At the operational level, both individuals and companies need to provide a list of mining equipment, a qualified electronic signature of the equipment, a description of technical parameters and energy consumption, and a digital wallet address for receiving mining income. In addition, it is necessary to supplement the documents specified in Article 1, Item "a" of Resolution No. 719 of the Russian Federation Government on July 17, 2015, and attach relevant documents on technical requirements for industrial products, including technical conditions, enterprise standards, process procedures or national standards. This process is designed to ensure that applicants meet the requirements of technical access, tax compliance and anti-money laundering supervision. Unregistered companies will face fines and legal risks.
2.3 Taxable elements of the new VAT regulations
According to the draft proposal, the scope of VAT collection will clearly cover cross-border mining services, including leasing mining equipment to overseas customers, providing real-time computing services, and electricity supply (if the Russian Ministry of Finance's plan is finally passed). In terms of tax rate standards, the draft bill sets a general tax rate of 20%, which applies to equipment leasing income; at the same time, if the service object is a company in a member state of the Eurasian Economic Union (EAEU), it can apply for VAT exemption and enjoy a zero tax rate. Service providers applying for zero tax rate must submit the "EAEU Customer Tax Registration Certificate" and "Service Use Statement". For other tax rates, please refer to Article 164, Paragraph 1, "List of Zero Tax Rates for Cross-Border Services" of the "Tax Code of the Russian Federation". Regarding tax obligations, the draft bill stipulates that the taxpayer is an equipment/computing service provider registered in Russia (including permanent establishments of foreign companies). If the equipment lessor fails to fulfill the declaration obligation, the actual controller of the equipment (such as the data center operator) shall bear joint and several liability and pay the value-added tax and related late payment fees on behalf of the lessor. The declaration cycle is divided into two periods, monthly and annual, and the Russian service provider shall make the declaration and submit relevant materials such as cross-border service contracts and foreign exchange income certificates to fulfill the tax obligations.
(1) Monthly declaration: Generally, you need to submit a VAT declaration form and provide a notarized Russian-English bilingual cross-border service contract, a bank voucher for foreign exchange income (Ruble/foreign currency receipt certificate) at the same time. If you apply for a zero tax rate for customers from the Eurasian Economic Union (EAEU) member states, you must attach their valid tax registration certificate.
(2) Annual declaration: To complete the annual filing, you generally need to submit a device usage log that records the equipment usage time or computing power output data (unit: TH/s·day) of overseas customers.
It should be noted that all the above declaration documents must be submitted with an electronic signature certified by the Federal Tax Service (FTS), and the computing power service must be strictly measured on a daily basis and matched with the contract pricing terms. 3. FinTax’s Viewpoint There is fierce controversy in Russia regarding the new VAT regulations. Some people who support the proposed regulations believe that the new regulations have two benefits. From the perspective of policy linkage effect, the regulations at the beginning of the year required all cryptocurrency mining businesses in Russia to register, allowing the tax authorities to fully grasp the equipment inventory data of the entire industry. This move is of great significance. It not only allows the regulatory authorities to have a clear understanding of the scale of the industry, but also provides precise targeting for the collection and management of VAT. Through registration information, the tax authorities can clearly identify the taxable objects, understand the number, scale and operation of the company's equipment, and effectively implement the new VAT regulations to ensure that all taxes are collected. From the perspective of government revenue, the implementation of the new VAT regulations will bring considerable fiscal revenue to the Russian government. The Ministry of Finance estimates that VAT can increase revenue by 45-60 billion rubles per year. This fund is of great strategic significance to the Russian government and will be mainly used to subsidize the upgrading of domestic power infrastructure. The cryptocurrency mining industry is an energy-intensive industry with high requirements for the stability and quality of power supply. By upgrading the power infrastructure, the efficiency and reliability of power supply can be improved, and the electricity costs of enterprises can be reduced, thereby providing better support for the development of the cryptocurrency mining industry. In addition, from a macroeconomic perspective, this fiscal revenue can also be used in other areas of people's livelihood, such as education, medical care, social security, etc., to improve people's living standards and promote sustainable economic development. At the same time, through the implementation of the new VAT regulations, the Russian government can also guide the cryptocurrency mining industry to develop in a more standardized and legal direction, promote the healthy and stable development of the industry, and contribute to the transformation and upgrading of the national economy. At the same time, the draft new regulations are also facing a lot of opposition. Opponents believe that the implementation of the new VAT regulations in the short term will lead to an increase in tax burdens, and some small and medium-sized industrial-grade miners and MIOs may withdraw from cross-border business because they cannot afford the increased costs. These small and medium-sized companies are usually small in scale and weak in financial strength. When faced with higher tax rates, it may be difficult for them to maintain normal operations and profitability. Their withdrawal will lead to accelerated industry consolidation, and market share will further concentrate on large industrial miners and MIOs. Although this concentration of market share is conducive to improving the overall efficiency and competitiveness of the industry to a certain extent, it is not entirely a good thing for the ecological balance of the entire mining market. In the long run, the trend of the industry may be more severe. In order to seek lower costs and higher profits, leading industrial miners and MIOs may migrate their data centers to low-tax countries such as Kazakhstan. These countries may offer more favorable tax policies and electricity prices to attract relevant personnel to settle in. Once the leading industrial miners and MIOs migrate on a large scale, Russia's computing power share may decline, and computing power is the core competitiveness of cryptocurrency mining. The decline in computing power share means that Russia's voice and influence in the global mining market will be weakened, which may affect its technological development and innovation in this field.
We believe that the following aspects should also be paid attention to for this draft of the new regulations. First, there is a dispute over the classification of tax items. The Russian Ministry of Finance and the Tax Bureau should calculate the tax rate of 20% for mining services as "equipment leasing". In this regard, it is still in the draft stage and no agreement has been reached. Secondly, the lack of cross-border transaction certificates is a serious problem. More than 60% of mining companies cannot provide tax payment certificates signed by overseas customers, resulting in the tax authorities refusing to deduct input tax. In addition, the problem of energy cost allocation also needs to be solved urgently. The electricity expenditure of mining farms accounts for a large part of the operating costs, but the current regulations do not specify the VAT deduction ratio of electricity purchase invoices.
Despite the controversy, overall, this is still a useful attempt by Russia to promote the transformation of its cryptocurrency policy and the healthy development of the crypto market. If the relevant reforms are finally implemented and achieve good results, Russia may expand the reforms to more sub-sectors and continuously guide the development of its crypto industry on the premise of safeguarding national interests.
Brian
Weiliang
Miyuki
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